The Role of Vendor Legitimacy in IT Outsourcing Performance: Theory and Evidence

Abstract

Information technology outsourcing (ITO) relationships today are facing increasingly turbulent environments. This research examines ITO performance by focusing on client firms’ perceived legitimacy of vendors, termed “vendor legitimacy,” consisting of pragmatic, cognitive, and moral dimensions. Based on our surveys with executives and managers at 200 ITO client firms, the study’s findings present the imperative to actively manage vendor legitimacy for achieving and sustaining ITO performance. Specifically, at the strategic level, clients’ perception of vendors as mutually aligned, long-term-oriented, tightly integrated partners is critical. At the operational level, clients should collaborate with vendors to design and establish interorganizational routines that undergird vendor legitimacy. At the managerial level, clients’ relational governance plays a pivotal role in attaining procedural justice, ethical standards, and fairness in the interorganizational collaboration. In sum, our study suggests that creating a dedicated corporate function or unit for continually overseeing and assessing a portfolio of vendors and swiftly identifying and responding to potential issues and crises related to vendor legitimacy would be a worthwhile investment.

Utilizing expectation disconfirmation theory to develop a higher-order model of outsourcing success factors

“…Satisfaction in outsourcing is typically defined as a "positive state" resulting from an appraisal of a company's interorganizational relationship (Chuang et al, 2020). Mutual satisfaction illustrates the importance of developing a partnership in a satisfying outsourcing relationship and is sometimes termed a "pragmatic collaboration" (Hsu et al, 2022;Helper et al, 2000). Some researchers have argued for the use of performance-based contracts to enhance the likelihood of mutual satisfaction (Sols and Johannesen, 2013).…”

“…The global outsourcing market continues to expand (Hsu et al , 2022; Junaydullaevich and Tulqinovich, 2021; Könning et al , 2019; Wang and Wang, 2019) with information technology outsourcing (ITO) decisions becoming vital for organizations (Handley et al , 2022; Rajaeian et al , 2017). Indeed, outsourcing constitutes a key competitive strategic decision (Pereira et al , 2019; Wang and Wang, 2019; Ishizaka et al , 2019), and it has the potential to provide the organization with divergent results.…”

“…If successful, outsourcing can result in enhanced productivity, cost savings, improved quality and other positive impacts on the company (Gupta, 2021; Junaydullaevich and Tulqinovich, 2021; Ishizaka et al , 2019; Lahiri, 2016; Yao et al , 2010; Dolgui and Proth, 2013). However, if unsuccessful, outsourcing can lead to suboptimal quality, intellectual property misappropriation, litigation and other negative impacts on the corporation (Hsu et al , 2022; Gupta, 2021; Junaydullaevich and Tulqinovich, 2021; Rajaeian et al , 2017; Lahiri, 2016).…”

Relational governance in the ITO: the role of self-determination theory and the mediating effect of control perceived

“…Recent research on IT outsourcing highlights that contractors face critical situations in their relationship with suppliers, including factors such as: process integration and information sharing (Navarro-Paule et al. , 2023), business ideas and innovation from their suppliers (Effah and Adam, 2022), vendor legitimacy (Hsu et al. , 2022), control the schedule risks (Lu et al.…”

“…Recent research on IT outsourcing highlights that contractors face critical situations in their relationship with suppliers, including factors such as: process integration and information sharing (Navarro-Paule et al, 2023), business ideas and innovation from their suppliers (Effah and Adam, 2022), vendor legitimacy (Hsu et al, 2022), control the schedule risks (Lu et al, 2022), information security (Bhatti et al, 2021) and knowledge transfer in the relationship (Deng et al, 2021). Nevertheless, it is still unclear which characteristics of IT managers can be fundamental to impact Relational Governance (RG) in IT outsourcing positively.…”